Lab Zero Games has spat with PayPal

Lab Zero Games, which raised over $800,000 online so they could make more content for indie fighting game Skullgirls, is finding that it is at odds with its unwanted business partner Paypal.

Most of the contributions to Lab Zero’s IndieGoGo campaign were paid via PayPal, but given the size of the amount, Paypal wanted the Skullgirls developers to “take on the risk” if a large number of backers decided not to actually pledge.

The studio could not guarantee this, of course, so Paypal simply froze the account, meaning that employees could not be paid.

All looked fairly grim. Lab Zero fought back with several complaints including one lodged with the Consumer Financial Protection Bureau. As a result, Paypal agreed to open up the account, though they’re still holding $35,000 as “collateral”.

To be fair to Paypal, Lab Zero made a mistake when it decided to raise money to create a new character by having gamers vote on which one to build. After the result, some gamers who did not get the character they wanted threatened to withdraw their donation to the project.

According to Kotaku, Paypal did not want to be left having to issue shedloads of refunds for those who petulantly withdrew their investment because they did not get what they wanted.

As a result, Paypal has a lot of support for defending itself against the actions of the Fighting Game Community, even if it is a PR disaster.

As one gamer pointed out “Lab Zero, are the biggest victims here because of the whiny, spoiled, loudmouthed, useless Fighting Game Community” and another one pointed out that Paypal was protecting itself.

Still the situation has shown up weaknesses in using such financial systems to raise short term finance for IT projects. Suddenly you have a business partner that you did not expect calling the shots on some pretty important business decisions.